Introduction: Bangladesh’s industrial sector is a major driver of GDP, exports, employment, and foreign exchange. The sector is composed of a textile industry, engineering, food, fuel and power, and pharmaceuticals and chemicals, with the textile industry taking up an overwhelming 25% of the sector (Ahaduzzaman et. al. 2017). Bangladesh is home to many Ready-Made Garment manufacturers, such as H&M and other powerhouses in the sector. As such, creating a green transition in this sector is challenging. Some main challenges include high upfront costs, difficult bureaucracy, structural barriers, lack of information, lack of financial incentives, dated infrastructure, and domestic political turmoil (Jahan, 2025). The barriers to a clean energy transition include an inability to meet their economic goals of becoming a high-income economy by 2041, policy inconsistencies and regulatory uncertainty, and inadequate public/private finance. Progress towards this transition includes recent renewable energy pledges/policies, a sustainability vision with substantial goals set for 2030, and measures taken to bolster public and private finance through refinancing schemes.
Analysis—Decarbonization Progress:
Rapid growth in the Bangladesh industrial sector in recent decades has helped lift many out of poverty and establish Bangladesh as a global exporter (especially in garments). However, this growth has come with increased energy demand, rising greenhouse gas (GHG) emissions, environmental strain, dependence on fossil fuels, inefficiencies in industrial processes, and rising regulatory and market pressures globally for greener, sustainable production (DCCI 2023).
Bangladesh’s 2025 Renewable Energy Policy aims to boost renewable energy by setting targets of 20% electricity from renewables by 2030 and 30% by 2040. Key measures include offering a 10-year corporate tax exemption followed by a five-year partial exemption for producers. The policy allows net metering and decentralized generation (solar mini, micro, nano, pico grids), particularly in off-grid areas. It permits surplus electricity sales and encourages local manufacturing of renewable energy equipment. The policy sets out a goal for clean and renewable energy with a target of 40% of power generation from clean sources by 2041 (Reg Follower 2024; The Daily Star 2023). There is also a Green Transformation Fund (GTF) set up as a refinancing scheme that provides financing for the import of green capital machinery & accessories by manufacturing and export-oriented entities.
The BGMEA Sustainability Vision 2030 includes RMG or Textile Sector Sustainability Targets which aim at reducing carbon emissions by 30% by 2030, using sustainable raw materials in 50% of cases, reducing groundwater usage by 50%, 100% zero discharge of hazardous chemicals, 20% use of renewable energy; energy consumption reduction by 30%, and reducing deforestation by 30% (The Observer Bangladesh 2024; Dhaka Tribune 2023). The vision also looks at a growing number of “green factories” with LEED, USGBC, and other certifications. A proposed policy in 2025 dictates an allowance of industries to purchase renewable-generated power (corporate power purchase agreements, CPPAs), captive generation by industries, rooftop or open land solar, or consortium models.
Analysis—Decarbonization Barriers:
Despite the established policies by the government of Bangladesh, there are still some limitations and observed challenges. Key amongst them is the Nationally Determined Contribution (NDC 3.0) policy, which is an upgraded commitment under the Paris Agreement (Bangladesh Ministry of Environment 2023; Enerdata 2023). It is a reduction in GHG emissions relative to business-as-usual by 2035, of which part is unconditional, part conditional. NDC 3.0 requires ~$116.8 billion, much of it conditional on external support. Domestic public or private finance is inadequate to fill the gap. There are institutional capacity & technical limitations; any industrial firms (especially SMEs) lack technical expertise, capabilities for energy audits, process optimization, or for maintaining upgraded equipment.
There are policy inconsistencies and regulatory uncertainty. Some policies, such as IEPMP 2023, have been criticized for emphasizing fossil fuels and LNG expansion, which could lock in carbon emissions for decades (Bangladesh Ministry of Power 2023; The Financial Express 2023). There is no strong action plan explicitly for industrial efficiency. Experts have noted that energy efficiency remains underprioritized. Many targets (2030, 2040, 2041) are near or mid-term, which means urgent action is needed, but capacity and finance may not scale fast enough. Some policies or master plans foresee continued use or expansion of LNG/coal or fossil fuel infrastructure, which conflicts with the deep decarbonization ambition.
Despite the limitations, Bangladesh’s energy policy package has helped to overcome some of the challenges of sustainable and deep decarbonization objectives. There is meaningful progress in the garment/RMG sector (Dhaka Tribune 2023; The Observer Bangladesh 2024). There are many green certified factories, an implementation of certain sustainability standards, and reduced energy consumption per unit output in some cases. These show that the incentives and certification approaches are working to some extent. There is partial achievement of renewable energy targets. There is some increase in RE deployment and rooftop solar, but far short of targets. For example, as per “Renewable Energy Policy 2025”, the current RE generation capacity (~1,563 MW) is significantly below what is needed to reach 20% electricity from RE by 2030. Although GTF and Green Climate Fund projects are helping some industrial firms, many more lack access to affordable credit, especially small/medium plants. Some banks are still reluctant, due to foreign currency risk, import‐duty/VAT, and technical risk dampen investment.
Bangladesh has built a comprehensive policy package, combining market-based incentives, regulatory mandates, sector goals, financing, and planning. The various policies in place align with international norms (e.g., NDCs, BGMEA, etc.) and have many of the right components. Deep decarbonization, however, is ambitious, and many of the policies are still early in implementation (Bangladesh Ministry of Environment 2023; The Observer Bangladesh 2024).
Recommendation: It is recommended that Bangladesh take aggressive action to remedy its decarbonization barriers while maintaining its progress on other fronts. Bangladesh should address its private and public capital limitations by restoring macroeconomic stability (e.g., stable currency, controlled inflation), developing domestic capital markets (e.g., strengthening regulations to create well-structured public-private partnership models), and creating an easier and more conducive business environment (Hossain, 2025).
By refocusing their primary energy plan to explore renewables as a priority, Bangladesh could also lock in plans for decarbonization (IEPMP 2023). The IEPMP’s Primary Energy Supply Plan focuses on Natural Gas, Petroleum Products, Coal, and “Other Energy Sources.” It dedicates 20 pages to traditional and nonrenewable energy production and only 2 pages to clean energy transitions. There needs to be a paradigm shift in the way that the Bangladeshi government plans its energy policy going forward, towards renewables as a major driver of their energy policy, instead of as an afterthought.
Bangladesh should implement the following policy tools:
Tax Incentives: Bangladesh should offer corporate tax exemptions or reductions to firms, both domestically and globally, that invest in renewable energy or energy-efficient equipment. It has already partially implemented this through import duty exemptions, tax holidays, stamp duty exemptions, and carbon trading incentives (JNTech 2025).
Financial support: Whether through subsidies or grants for capital investment, Bangladesh could reduce the cost barrier to decarbonization. For example, they could establish a renewable energy/sustainable energy fund (Moazzem et al., 2022).
Regulatory standards: Through updated regulatory standards that require a certain amount of clean energy implementation, like the EU’s Renewable Energy Directive, they could drive much more aggressive decarbonization (European Commission, n.d.).
Risk mitigation: Using credit guarantee facilities, subsidized interest rates, or long-term low-interest loans could encourage private lending and reduce foreign exchange risks for imported clean energy equipment or foreign-financed projects.
Institutional capacity growth: Bangladesh could use the Super Energy Service Company (ESCO) model to create a government-backed entity that addresses the challenges, as with India’s Energy Efficiency Services Limited, which supports many solar projects. A Super ESCO could help arrange some of the low-cost international financing for the growing number of projects (Alam, 2023).
Soliciting funding from multilateral agencies: Through agencies such as the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank, Bangladesh could solicit funding for many of its industry-greening initiatives.
Through these policy tools and paradigm shifts, Bangladesh can encourage significant progress in the greening process of its industrial machine. By implementing these tools, Bangladesh can take the lead in global industry decarbonization and cement itself as a green industrialized nation on the world stage.he world stage.
Eliot Jobe 
Leave a comment